Warren Buffett is the textbook inspiration for long-term investors; he’s been holding stocks longer than many people have been alive. Amazingly, he’s worth $103 billion, but most of that has come over the past decade thanks to compounded returns.
So if you’re looking to follow his buy-and-hold investment strategy, here are three stocks the Oracle of Omaha owns that have the fundamentals to remain in your diversified portfolio for the long run.
1. Buffett’s largest holding is a good one
Electronic devices giant Apple (AAPL -0.20%) is one of Buffett’s most recent investments; he began building his stake in 2016. Today, Apple is his largest holding, a staggering 42.6% of the portfolio in his holding company Berkshire Hathaway. The stake is worth more than $154 billion, roughly four times the size of Berkshire’s next largest holding, Bank of America.
Apple’s appeal is obvious; the company’s become one of the most recognizable brands in the world, with more than 1.8 billion active devices worldwide. That’s a huge distribution footprint for Apple to make money from app store sales, hardware sales, and subscription services. The company did $107 billion in free cash flow alone over the past year, more than most businesses do in sales.
Personal electronics are our gateway to the digital world, and it doesn’t look like that’s changing anytime soon. Apple has an enormous amount of user data and the deep pockets to innovate and protect its business from the competition. Its stock pays a dividend, a classic trait among Buffett stocks, and Berkshire’s huge position shows Buffett’s confidence in the company moving forward.
2. A timeless classic with future potential
The Coca-Cola Company (KO 0.11%) is a longtime holding for Buffett, who began buying up shares in the late 1980s. He’s famous for taking photographed swigs of Cherry Coke flavor soda. The company is one of the world’s largest beverage companies and owns different soda, juice, water, tea, and coffee brands. Berkshire’s stake is worth just north of $25 billion and represents 7.1% of the company’s portfolio.
Another company with immense brand power, Coca-Cola products can be found in virtually every grocery store, restaurant, and vending machine worldwide. The company’s massive distribution network is a competitive advantage, blocking other brands from getting high exposure to consumers. Coca-Cola can also use its enormous reach to grow up-and-coming brands it’s developing or acquiring.
For investors, Coca-Cola is one of Wall Street’s most cherished dividend stocks. It’s a Dividend King that’s raised its dividend for a whopping 60 consecutive years. Investors have steadily built wealth by taking those dividends and reinvesting them over decades. Coca-Cola is a mature company today, but its dominant position in the beverage market gives it a long runway to slowly raise prices and sell more products incrementally as the global population grows.
3. An e-commerce giant with more to offer
Buffett is famous for a general aversion to technology companies, but he’s made an exception for e-commerce titan Amazon (AMZN 0.30%). People do more shopping online today than ever before, and Amazon is the unquestioned leader in that game, with a 37.8% market share of e-commerce sales in the United States. The stock is one of Berkshire’s smaller positions, worth just over $1.4 billion and logging in at 0.4% of the company’s portfolio.
Most know Amazon for its e-commerce business, and that’s probably not going to change anytime soon. But investors could benefit from the company’s other business segments that have room to grow over the coming years. Amazon Web Services (AWS) has become the largest public cloud platform in the world; it’s highly profitable and was responsible for all of Amazon’s total operating income in the second quarter of 2022.
Research company Gartner estimates that end users will spend as much as $600 billion on public cloud services next year, up 46% from 2021 spending levels. AWS’s revenue over the past year is $72 billion, which shows that there’s still room to expand within an already rapidly growing market. Considering this, along with its tremendous e-commerce business, Amazon could remain a lucrative investment for years.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway (B shares). The Motley Fool recommends Gartner and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $47.50 calls on Coca-Cola, long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.